Issues to be addressed by the program for measuring incremental costs for the environment

The debt crisis of the early 1980s and the resulting economic collapse led many developing countries to undertake structural adjustment programs. Success is judged by sustainable economic growth, which often depends on the degree to which public and, in particular, private investment is spurred by the reforms. Paradoxically, this investment response often hinges on whether adjustment is perceived as permanent and whether the reforms are expected to generate growth. This volume explores the impact of adjustment and reform on capital formation and economic growth, drawing on both econometric analyses and recent developing country experiences. The monograph first surveys recent work on the topic of investment and adjustment. The second part analyzes empirical evidence, mainly from East Asia and Latin America, of the effect on investment of external shocks, debt crises, and structural adjustment. The collection concludes with a panel discussion by leading experts on appropriate policies for renewing investment initiatives. The contributors examine the macroeconomic reasons for the substantial reduction in capital formation in the developing countries during the 1980s. They evaluate the effects on private investment of economic instability, public sector investment levels, and external debt. They also examine why private investors often adopt a wait-and-see attitude during structural adjustment. The conclusion is that building investors confidence through stable macroeconomic policy is the most effective way to promote private investment.